To be successful in crypto you must do two things: be on the trends and be early. The past trends have been DeFi, gaming, NFTs, metaverse, and layer 1’s. During this bullish phase, these sectors outperformed the market substantially. Let’s dive into some of my favorite sectors/narratives for 2022. (No particular order)
Artificial Intelligence
For those that have been following me, you know I am extremely excited about artificial intelligence. Not only am I excited about AI innovations in the blockchain, I am a firm believer that AI and machine learning will play an integral role in society for generations to come. Currently, AI has a market cap of $60 billion. By 2028 this is expected to expand at a CAGR of 40.2% (Grandview). AI has three outlooks: solutions, technology and end-use. Solution outlooks are hardware, software, and services. Technology outlooks are deep learning, machine learning, natural language processing, and machine vision. End use outlooks range from various sectors: healthcare, law, retail, marketing, agriculture, manufacturing and transportation (Grandview). Subsectors I am specifically interested in are deep learning, machine learning, end use in law, end use in marketing and end use in health care
Stablecoins
The market for stablecoins IS HUGE. From January 2020, to today (2/6/22), the market cap for stablecoins has grown from $5.8 billion to $153 billion (coinmetrics). There is huge demand for stable coins in the crypto world. Currently, these are dominated by USDT (Tether) and USDC (Circle). These currently account for 73% of market share. Tether and Circle are fully backed 1:1 with fiat. They are considered centralized stablecoins because they are runned by single entity’s and are collateralized off-chain (with fiat). However, we are seeing a trend switch: to algorithmic stablecoins. The rise in Luna’s UST should be an indicator to a potential trend switch. Stablecoins are supposed to maintain a 1:1 peg with the U.S dollar. Algorithmic stablecoins do this off-chain, often being referred to as non-collateralized. Let’s use UST as an example. For every UST minted $luna needs to be burned. The burning and minting mechanisms are how $UST maintains peg. Algorithmic stablecoins offer users something that Tether or Circle can’t: decentralization. I am going to keep my eye on stablecoins that provide interest to its users, whether it’s through a DeFi protocol like Anchor Protocol or its a native yielding asset.
As a Service
In my previous blog post I talked about the concept of “as a service”, which is essentially the outsourcing of various blockchain functions. There are five blockchain functions that I believe are opening the door to a whole world of innovation in the blockchain: farming as a service (FAAS), blockchain as a service (BAAS), nodes as a service (NAAS), staking as a service (SAAS) and Liquidity as a service (LAAS). Outsourcing enables efficiency. The outsourcing of liquidity (LAAS) allows for Dex’s to trade with less slippage. FAAS and SAAA+S allows users to generate the most yield passively. BAAS allows enterprises to use blockchain technology without having to deal with overhead costs of building their own blockchain. I want to elaborate more on Nodes as a Service (NAAS). Nodes on the blockchain keep a copy of data of the DLT. Just like mining, running nodes allows you to generate income by participating in the function of the blockchain. Running nodes has a couple barriers of entry: cost of hardware, software, network connection, maintenance, etc. Essentially it is very costly. NAAS does all the dirty work for us. It allows more users to participate in the network at lower costs.
Interoperability
Interoperability is different blockchains being able to operate with one another. The best way to describe interoperability is through two closed source e payment networks: Venmo and Cash App. You can Venmo and Venmo users. You can CashApp a CashApp user. Can you Venmo a CashApp user? No. Interoperability would allow a Venmo user to Venmo a CashApp user, seamlessly. Currently the blockchain is in its primitive stages of interoperability. We have bridges and some interoperable frameworks (Cosmos). In my opinion the future is not one blockchain, it is multi-chain. In order for projects to survive they must be able to function across multiple blockchains.
Social Media Platforms
To round out part one of my 2022 trends we have social media platforms. For all this talk about Web 3.0, I find it amusing that most content is still being posted on Web 2.0 social media platforms such as Twitter, YouTube, TikTok, Instagram, etc. One of the main selling points of web 3.0 are users taking back control. Web 2.0 social media platforms are disadvantageous to your typical user. They have control of your data, they have the ability to deplatform you and the majority of revenue is taken by the platforms. This is understandable. Centralized social media platforms are private companies. They have expenses they need to take care of (Data centers, cloud storage, employee’s, etc). They are also profit maximizing firms. Their main revenue stream? DATA. In order for web 3.0 social media to thrive, and take market share, they need to achieve the following things: amazing user experience, decentralization, monetization for content producers AND viewers, and data privacy.
Option Vaults
We are extremely early in DeFi. Right now we have access to primitive financial tools: borrowing/lending, decentralized exchanges and derivatives (kind of). There is a whole world of more advanced financial tools that are about to flood this landscape. I am most excited about options. If Robinhood has shown us anything it is that a typical retail trader LOVES OPTIONS. For Robinhood, options have been a cornerstone for their success. With 19 million active users and an annualized revenue of $656 million (Messari). On the blockchain, option protocols are broken down into two categories: marketplaces and structured products. Marketplace protocols create the actual option contract and facilitate the buying and selling of them. Structured products are built on top of the marketplace. They offer vaults for users to deposit into. Each vault has a defined yield strategy underneath complex pricing and risk management strategy (Messari). Option protocols have been lagging, compared to other DeFi products, but the increase in TVL has me excited.
Tokenized Assets
The tokenization of assets is the creation of digital assets on the blockchain that represent a real world asset. Almost any physical asset can be tokenized on the blockchain. Precious metals, real estate, securirities, art, certificates, debt, identity, intellectual property, and in-game assets to name a few. Asset tokenization has many benefits. Increased liquidity, easy transportation of assets, transparency, cheaper transactions and ownership are some use cases for the tokenization of assets. I am fairly certain we will see more and more real world assets become tokenized on the blockchain.
Data Management/Privacy
Data is digital oil. Once you grasp that data is used in EVERY FUNCTION OF THE WORLD you will understand the importance of data management, security and privacy. There is a reason social media platforms like Facebook, Instagram, Twitter, Tik Tok and YouTube are free. It’s not because they are good guys, it’s because they have access to all of our data. Every single thing we do on the internet creates a data point. These data points are harvested, collected and sold to whoever wants to buy it. This makes big technology a lot of money. 95% of the data we have today has been created within the past five years. With the technological revolution only beginning, along with the mass exodus to the blockchain coming soon, the amount of data that is about to be created is absurd. Protocols that can safely secure and store our data in a decentralized manner will win.
DeFi
DeFi is the most undervalued sector. This will get its own blog piece.
I hope y’all enjoyed this. Excited to look back on my predictions.
Ben
Sources
https://www.grandviewresearch.com/industry-analysis/artificial-intelligence-ai-market
https://www.theblockcrypto.com/data/decentralized-finance/stablecoins
https://messari.io/article/overview-of-options-vaults?referrer=grid-view
